PETER ATTARD MONTALTO: Reinforce leadership in fragile institutions

I often get in trouble for things I write. Given how contentious issues are in SA this is a good thing (that’s my view at least and I am sticking to it).

One of the more interesting areas of debate is to focus on how fragile things are — in particular institutions.

This can often rankle senior people in institutions because the likes of the National Treasury or department of public enterprises are huge — the former with several thousand people and the latter with several hundred. Yet we describe them as fragile. It is the same at Eskom, which we also describe as fragile. There are more than 40,000 people at the state-owned enterprise.

It is not to disrespect the whole mass of people in an institution to say there are key ingredients that are required. It would be like saying that the arches of a bridge are irrelevant and only the keystone mattered. Yet take the keystone out and the whole thing would collapse.

Equally, it’s not belittling leaders to say an institution is fragile. Remove them and chaos could erupt — is the definition of being fragile.

The Treasury still has too few good people two and three levels down below the top to ensure there is comfort with its long-term trajectory. The challenge in finding a new director-general — which has largely been put on ice for the moment — is testament to this. Dislodge the existing structure and the whole thing might disintegrate.

The presidency is another example where far too few amazing people are doing — basically — everything. The way such people are capacitated and supported to build firmer and more sustainable institutions is a key challenge.

Weak institutions held together by good people at the top are liable to collapse when these people naturally move on regardless of the reason — perhaps their own simple need for new challenges.

Eskom is obviously in the spotlight at the moment. In weak institutions (in this case given the cesspit of corruption and sabotage that is being battled back there) certain structures are established and certain people become very important to correct the wide institutional weaknesses. In the case of Eskom, the CEO’s office is exceptionally important with some very high-calibre people that keep the show on the road. Such informal structures would disappear, however, on a change of leadership — and are often forgotten about when considering the risks of new leadership. The impact would be dramatic in my view.

Similarly, if one takes Mandy Rambharos, who is head of the just energy transition at Eskom and is now leaving Eskom for new pastures. The weakness of the broader climate institutional structure in SA means it comes down to individuals and indeed one individual (who deserve a medal) to drive the early stages of change through sheer force of expertise, personality and conviction. SA is blessed for such people, but equally it shouldn’t be this risky key-man-dependent way.

SA exceptionalism is thankfully on the back foot in recent years versus its sickly sweet appearances during the state capture years (which perhaps was responsible for downplaying the risks emerging). However, exceptionalism can still make politicians especially underestimate the risks around institutions, or misdiagnose situations.

Transnet is a key case in point. Thanks to a strong salesperson  Transnet has become an institution lauded far beyond what has actually happened in recent years. Operationally and financially it is on the verge of collapse in the coming year.

All this is rather important as we must both secure existing institutions and build new ones.

We must secure Eskom at a holding company level to ensure that the just energy transition can progress and distractions like the “EAF (energy availability factor) mafia” don’t take over and divert us down a dead end. Eskom, as mad as it seems, remains exceptionally important to what comes next in both the wider energy liberalisation and climate action.

A strong and independent National Transmission Company of SA (NTCSA) in particular is needed, one that can be unshackled from the holding company and have its own board. In the clamouring for a new board of the holding company we should not forget that in some ways the NTCSA board, still months outstanding, sitting gathering dust on a desk in the government, is just as, if not more, important long term.

Similarly, at the National Treasury a change only a year ago to a new head of the asset and liability management division swept out the deadwood and unimaginative leadership that was in that area for too long. There is now an understanding of the need to build internal future leaders.

Equally, the job of the new Eskom board should not be getting involved in boiler tube leaks in power stations but instead on how to strengthen the existing management structures into a sustainable institution to deal with such issues over the long term. In other words, build them into robust institutions.

Climate and the just energy transition are perhaps the most interesting areas to consider. With a 30-year path to net zero, there is the ability to do some hard thinking for the long term on structural imperatives.

A largely uninspiring department of forestry, fisheries & environment — together with the centrality of funding and the importance of consensus a whole society approach — has meant new thinking is needed.

The Just Energy Transition Partnership (JETP) process has caused the creation of new ad hoc institutions to be quickly cobbled together within the cracks of political fault lines. But these are perhaps suboptimal.

The Presidential Climate Commission has been set up more as a quasi think-tank so far. But it has shown it has the political as well as the strategic, logistical and policy leadership capabilities to be something more. Serious thought should be given to how you pull together a broader institutional framework across the government into a central body, either as a separate ministry or something permanent within the presidency.

Politicians like legacies. Institutions are perhaps the best place to focus. 

• Attard Montalto is head of capital markets research at Intellidex, an SA research-led consulting company. This article first appeared in Business Day.